Squidoo!

August 17, 2009

Deep in Lifetime Premium Charge mire.

As reported last week in their online 'chat' session, Betfair are to change the time over which the premium charge is calculated. Currently it is over 60 weeks, soon it will be over the lifetime of the account. The fine details about how it will work are yet to be finalised - first £1000 profit allowance? number of markets? etc. But the important point is this time period change.

Naturally, not having the full commission figures for my accounts over their lifetime to hand, I requested a spreadsheet showing this. Shortly after, it arrived in my inbox.

Before I go on, I will explain that I have spent a lot of the time since the premium charge's introduction getting my previous 60 weeks commission level over the 20% threshold so that I can bet without worrying about what I'm actually going to be paying should I have a good run the next week. With this in mind, I was slightly apprehensive, but not overly so, about what I would find in the lifetime spreadsheet (my accounts are almost 8 years old, after a few years you start to forget the sorts of things you used to trade heavily).

To my horror, the sheet came up showing that I was about to find myself in a horrendous £130k premium charge hole. Sure, it showed a very healthy profit too, but the picture it displayed was not the full one, let me explain.

I mentioned before that you can begin to forget what you had been up to in previous years. Several years ago I discovered there was a recurring arbitrage opportunity. As this was 'free money', I obviously took the chance to build on my bank (which was already growing well 'organically' from normal trading, which accounted for - and still does - the majority of my profit).

This was an arb between a particular firm and Betfair, and it was in very good size. I did very many arbs of £30k or more, this was back in the day when this firm had the stomach for a very large bet... and they loved me! Because a very large % of these bets were winners on Betfair, and losers with them. Btw, said firm has me heavily restricted these days, even though I am one of their biggest losers.

In the end I had given them in excess of £500k, I'm unsure of the exact amount (you just get on with arbing when it's there). Lets fast forward to 2009 and the introduction of a lifetime premium charge, with the prospect of an excess of £500k added to an already large profit figure and you can see where this is going.

5 years ago, I was merrily arbing away. I could not have foreseen a lifetime premium charge 5 years later (let alone, allowed for it!), and when it is introduced, I will now be paying fairly heavily for not using a time machine (it's ridiculous).

I had given up moaning about the charge, I felt it wasn't well thought out or implemented to begin with, but I decided to get on with things and introduce a few strategies to nullify it a bit.

It's highly ironic, that it's arbitrage that has me in this mess. Since that is one of the strategies Betfair is quite happy with, even promoting it as a way out of the premium charge... There's serious problems if you start winning every time on Betfair though - that isn't supposed to happen. It would appear, the arbs I thought had a margin, were 20% worse than I thought!

Which is the main point of this posting: Why should I be punished for, the method / strategy with which I bet in the past, when I had no idea this would be bought in (and no chance to allow for it) in the future?

The solution: A lifetime premium charge from the time when the first premium charge was introduced. It's simple, fair, and everyone was in the picture.

And I wouldn't have the prospect of having to turnover however many £millions in wins and losses to counter it. Moan over (for now)... until I call my account manager later.

Aren't PC charges calculated weekly? You would just pay the PC on your weeks' profit. People who have been losing for 5 years and winning for a year won't pay the PC until they recover their losses? Maybe I'm wrong, that's what I understood from their blurb.

I agree with galejo. When they brought the current scheme if you'd paid >20% you started on your actual rate, if you'd paid <20% you started on 20%. Why would you assume they'd change this when they've never given any indication that they would?

You often mention the people that you know high up in Betfair. Shouldn't you ask them first before posting something that's going to worry punters and is in all likelihood a big steaming pile of rubbish? My money is on you (and everyone else) being in a £0 premium charge hole when they change it.

When I read your blog I can't help thinking sometimes what a whiny ungrateful person you come across as. If your £130k number is true then you must have taken at least £1 million out of them over the years. So you're getting ten times what the average person in Britain earns, tax free, out of them yet you never post anything about Betfair that isn't negative. If Bert Black reads blogs like this he must rue the day his site created the monster of the exchange pro-punter, someone who is happy to collect the golden eggs but who continually talks longingly about the day some time in the future when the golden goose is dead.

You know what, I did over-react when I wrote this, the situation is not quite as bad as I paint, though I stand by comments I have made that what I did in the past and the fortune (or not) that I experienced then, should not affect where I stand on PC in the future.

You are quite right, if I continue to bet at over 20% commission in the future, there should be no problem. I just have to track where I stand each week and try to make sure I offset things in weeks where I'm getting 'lucky'. Unfortunately, 'lucky' runs are not something the PC is supposed to catch if you take a reasonable amount of risk in their markets (and I do) - yet I find myself at risk of paying it should fortune decide that my edge is going to be cashed in next week. Like it or not, this is a failing in the way the PC is put together.

You're right about me coming across as a whiny person, I do tend to post when I'm having a go at Betfair. But that is because I know they read this website and I do take advantage. I'll make a positive post about Betfair soon, to offset my negativity, there's plenty positive to say. And I'll try to make sure I don't cross the line from constructive criticism to boring negativity, I'm fully aware it's not the most entertaining read sometimes. Without Betfair I wouldn't be doing anything I am right now.

I get round this problem by managing my betting across 7 accounts, although the maths get even more complicated as you are then balancing the commission discount with trying to avoid paying Betfair's premium charges. On top of that I also have 3 accounts with Betdaq who these days have a lot better liquidity, probably from the folk who have jumped the Betfair ship.

Herby, if it were that easy I would have done so. Sadly it isn't, Betfair have people that work to track accounts that take measures such as those to avoid the premium charge. They link the new accounts to your old ones and charge you the amount you would have paid.

I did suggest opening an account in my wife's name (then girlfriend) in a Betfair chat session, they were quick to say they would link them.